Actuarially Unfair Insurance and Downward‐Sloping Demand Curves for Giffen Goods

Christian Weber

Manchester School, 2001, vol. 69, issue 4, 377-386

Abstract: Barzel and Suen (Economic Journal, Vol. 102 (1992), No. 413, pp. 896–905) have shown that, if households can purchase actuarially fair insurance against higher prices, then goods which would have upward‐sloping demand curves in the absence of the price insurance will have downward‐sloping demand curves when the insurance is available. This note builds on their analysis by showing that, if the utility function is additively separable, then goods which would be Giffen in the absence of the insurance still have downward‐sloping demand curves even when the price insurance exhibits certain types of actuarial unfairness.

Date: 2001
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